Turkey: Handover Of The Leased Property After Conclusion Of The Lease Agreement

Introduction

As is known, a contract is only effective between the parties due to the principle of relativeness of contract. Lease contracts are also relative contracts and, as a result, if the lessor entitles a third party to a paramount right, related third parties shall not be obliged to allow lessees to use the leased property as a rule. However, the Turkish Code of Obligations ("TCO") Article 310 and the following articles regulate a different rule. Hereinafter, the regulation in the period of former Turkish Commercial Code ("fTCC") will be examined firstly, then the aforementioned regulations will be addressed.

Regulations in the Period of the fTCC

In Article 254 of the fTCC, the dissolution of leases through sales was regulated. According to the related provision, in the case of transfer of the use of the leased property to a third party by the lessor or, as a result of execution or bankruptcy proceedings, the "consent" of a third party was the condition of continuation of a lessee's use of the leased property. Legal consequences of this 'consent' –whether it is participation to debt or transfer of the contract- was debated.

That being said, according to Code numbered 6570 which applies to certain immovable leases, contracts are transferred by law. Nonetheless, if a new owner is in need of using the property as a whole for his own use, or that of his spouse's and/or his children's needs, or in part as a residence or as a place of business for personal execution of a profession or artifice by himself or that of his spouse or children, after 6 months an eviction action could be filed on the condition of notifying the lessor with circumstantial notification in a one month period after the date of acquisition, (Art 7/b/d) the new owner who does not so notify within the designated period would become a party to the contract.

Regulations Brought by TCC numbered 6098

As mentioned above, TCO Article 310 and the following articles include new regulations. Firstly, According to TCO Article 310, a new owner becomes a party to the lease contract upon the transfer of the leased property for any reason. In terms of the execution of the provision, the transfer of the leased property by sale is not obligatory, so long as it is transferred in a valid way, persons who gain ownership with different legal reasons can also become a party to the lease contract. On the other hand, full successors of the legator cannot be party to the lease contract under TCO Article 310.

At this point, TCO Article 311 should be taken into account. This regulation brings with it a vital novelty, such that when a third party gains a right in rem that affects the right of the lessee after formation of the contract, provisions regarding handover of the leased property will be applied by comparison. Right of building and right of usufruct are examples of such rights.

Due to TCO Article 310, with the transfer of the leased property to the third party, all the rights and obligations are transferred to the new owner. This way of transfer of the lease contract is connected to transfer of the property by law and, thus, occurs automatically. Attention should be paid to the fact that only transfer of a lease contract is in question here; none of the other obligations of the lessee to the lessor transfers to the new owner. Because of the automatic transfer of the lease contract due to legal regulation –legal transfer- transfers based on TCO Article 310, differentiate from the transfer of contracts that require stipulation of a transfer agreement, or a court order that creates a novelty right.

Although it is regulated that if the leased property is handed over after the formation of the contract, a third party can become a party to the contract in TCO Article 310, and there is no explanation regarding whether it is required to leave the leased property for the use of the lessee. Though this matter is debated, in Swedish and Turkish doctrines, TCO Article 310 shall apply upon the handover of the leased property after it is left for the use of the lessee1.

Another discussion in doctrine is whether it is required for the person who transfers the leased property to hold the title of the lessee. According to the Swiss Code of Obligations Article 261 that regulates the same topic, only in a case where the person who transfers the ownership of the leased property also holds the title of the lessor, a third party can become party to the contract. On the other hand, there is no such regulation in TCO Article 310.

The transition of the rights and obligations arising from the lease agreement to the new owner shall be proactive when the transfer is made pursuant to article 310 of the TCO. In this regard, the lessee shall be liable to the transferor for the mature obligations prior to the transfer of the agreement. Moreover, Article 198/2 of the TCO shall apply for the pledges and guarantees that are given by third parties. In other words, the liability of the third party that pledges as security for loans, as well as the guarantor, shall be maintained only if they consent in writing to undertake the liability.

Conclusion

Code of Obligations numbered 6098 brings with it two major novelties regarding transfer of a leased property. While the first of these novelties, the third party automatically – due to law- becomes party to the contract upon the transfer of the leased property to the third party, the other novelty is that the third party also becomes a party to the contract upon gaining a right in rem that affects the right of the lessee, other than ownership.

Footnotes

1 Alper GÜMÜŞ, Lease Contract According to New Turkish Code of Obligations numbered 6098, İstanbul 2012, p. 147 ff.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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